Who should be running Hollywood?
In Techland, techies run tech companies
I read the 133-slide deck pitching Nelson Peltz and Jay Rasulo for the Disney board (details here). Then I read about the potential management participants in one Paramount takeover scenario. I scrolled further and saw an article about Disney succession. Games of Thrones abound!
The question that comes to mind: in the modern era, who should be running major entertainment companies? Is an entertainment CEO-ship like some sort of Order of the British Empire honorific conveyed to prestigious personages in the fullness of time, or are there skills that probably constitute the best profile for the role in 2024 and beyond?
It is somewhat important that we get this right. Hollywood is suffering a rocky period partly because of how leaders have been chosen in the past.
Because things are always changing in terms of culture and user experience and technology, the most important thing for a media company is that the company is an innovation machine — both on the content side and on the product side, the company must stay ahead of the curve. That is not how everyone has been delivering (with exceptions).
Success comes to those who build and own differentiated, timely, and popular products– think of Star Wars, Game of Thrones, “Must See TV,” Disney Animation as a whole, HBO, or Netflix. Often these game changers are rulebreakers. These examples and others created tremendous value and required content visionaries who understood enough about the audience, the content and the technology to see their potential and bring them into being. Such inventions are the step changes by which companies grow, and the need for such inventions never ends.
My essential proposal is that real, necessary innovation of the future will almost always come from people who are obsessed with the product. So, in fashion, it would come from Hedi Slimane, not from his CFO. If key innovations will typically come from content and tech people (for brevity: “product” people, in contrast with “finance” people), then that should be the typical CEO profile, but it isn’t.
In tech, the best practice is to select leaders who have technical strength and product vision — it’s the thing that we do, after all. Leaders with technical strength and product vision can be expected to lead innovative projects that improve the company’s strategic position. Everyone understands this presumption.
What is a “product person” in entertainment in the modern era? Most obviously, someone with a great content track record. Could it also be a technical person? In the modern world these both matter. I tend to prioritize content in this context but, ideally, someone (or at least a team) could combine the two strengths.
“Financial CEOs” make deals, talk to Wall Street and the press, and keep things on the rails. This person may hobnob with politicians and know about corporate things like 1031 tax free exchanges and reverse triangular mergers. One problem with the financial or generalist CEO – in general, not just in Hollywood – is the future and the other problem is the present:
To build the cutting edge future that people care about — and to get there first —, you have to understand the product category and the customer better than competitors, which as a non-product person, is unlikely.
With respect to the present, the content people have an advantage in managing a strong flow of content and investing D2C brands with a brand and a voice that people care about even as trends evolve. But also, finance people tend to favor this quarter’s earnings over following a big vision that is 5 years out, which frankly over the past fifteen years has been a huge mistake for the Hollywood companies. The product person is more likely to embrace a big vision.
Financial CEOs will often tend to acquire assets, which may deliver synergies, but unless you keep innovating with the audience and with the evolution of technology, your year ten prospects can be disappointing. I am not saying that growth through acquisition never works, but the set of companies that have grown organically far outshines the leading companies that have grown through acquisition.
If you look at Disney’s earnings release the other day, they talked about money going out the door to Taylor Swift and Epic Games to drive some PR and everyone thought that was just great. At real product-driven companies, they talk about money coming into the company via products that the company owns, so at Netflix they talk about Netflix, and at Amazon they might talk about Amazon.com, Amazon Web Services or Prime. The Disney call was redolent of a financially managed company in decline.
Another crucial attribute worth spotlighting is the distinction between being an "aggressive builder" and merely a "manager." Transformation often meets resistance; overcoming it demands assertiveness, the willingness to challenge the status quo, and what at Amazon we called “bias for action.” This quality is indispensable for anyone aiming to enact significant change. It must be an innate trait or actively developed, as a purely managerial approach may fall short in driving innovation and navigating obstacles.
Why can’t product people just pitch ideas to a financial CEO so that you wind up in the same place but with “sound business judgment” at the top?
The really smart content visionary with big ideas doesn’t want to work for a conservative financial manager, and in any case the financial CEO is likely to reject rule-breaking, game changing ideas. Finally, I would argue that you need the right culture. Entertainment companies should not feel more hidebound than the typical young tech company, but they usually do. That’s a leadership issue.
What about companies that are diversified such that content is only a part of it?
I cannot think of a media company where film and television is not at the heart of the company’s value creation.
What if you are a stockholder and you just want someone to manage the business to deliver a dividend without any major fluctuations or surprises?
You’re in this business at the wrong moment, my friend. This is a time of war and of change. It is also a time of opportunity where brands will be built that generate significant cash flow, but that is still a goal.
The era of innovation and the need for great content never ends. Hollywood needs to empower its product people — its content and tech people — more than it has been doing if it hopes to innovate toward an exciting new era and succeed. The “aggressive product” profile should be the model for a modern media leader.
A Few Principles to Make This Work
In tech it is assumed that tech people are going to bring more to the CEO role than non-tech people. A similar presumption should apply in media and entertainment for product people and such people should be developed with this in mind.
At many companies there isn’t a great path for content people to become CEO. Often, once you become the head of a studio or a network, you have often sort of topped out. Compare people in finance who can be promoted up to corporate-wide jobs, including CFO. Consider a Global Head of Content role — but only if it has real authority.
Similarly, tech leaders at media companies are typically not afforded sufficient roles, which should be corrected. Content companies make it all too easy for anyone good to move on to Google or Amazon.
Content execs do not get enough exposure to the key overseas markets.
Execs should get exposure to both film and TV as they progress in their careers. These media used to be more unalike than they are now, but today often enough it’s the same talent going back and forth so an exec should take less of a hit moving from one to the other.
Amazon has an “S-Team” where strategic decisions are discussed amongst divisional leaders. Entertainment companies should have such an org and content leaders should be on it. They should have exposure to the week to week economics of the business as a whole.
Objective performance measures for execs have become less available and important in film and TV over time (discussed here). It has become more important than it used to be to get along and exhibit social cohesion. This needs to be rolled back. This system only works if the best people get promoted.
Let’s hope that great leaders are chosen because much is at stake!
Roy Price was an executive at Amazon.com for 13 years, where he founded Amazon Video and Studios. He developed 16 patented technologies. His shows have won 14 Best Series Emmys and Globes. He was formerly at McKinsey & Co. and The Walt Disney Co. He graduated from Harvard College in 1989.
Preach brother. As you have pointed out, entertainment companies are in the culture business, and culture is always a moving target. And in 2024, the real value is created by a big bet (made 2 years ago) that hits the culture just right today; that is very rarely going to be how a CFO thinks. CFOs pile up the assets of the past hoping they can milk another cycle of revenue out of them (like Buffett's old cigar butts theory). A great example is Doug Herzog-- he figured out where MTV needed to go, then Comedy Central, then all their cable channels, and was really tuned in to where the culture was going and what would be opportunities, but Paramount continued to choose lawyers and family members to run the show. (And now they have become de facto a broadcast channel for NFL games.) Susanne Daniels at YouTube is another great example-- not a techie, but gets the customers deeply, and was passed over for friends of the founders.
Product nerds (a/k/a people who are obsessed with what the company does and what its customers need) always make the best CEOs, because they are passionate about the customers and end users. That's how you create value in just about every business.
Great work here, Roy, totally agree.
Side note: I'm curious to hear more about what you mean by "exposure" here: "Content execs do not get enough exposure to the key overseas markets." And also what the effect of insufficient exposure to international markets has on those executives, internal processes, etc.